Miners scale back spending plans
Business investment unexpectedly fell last quarter amid weakness in manufacturing and other industries, while mining companies scaled back spending plans.
Private new capital expenditure fell 1.2 per cent in real terms, seasonally adjusted, in the December quarter, official data released this morning shows.
Today’s report showed companies forecast investment of $168.2 billion in the year ending June 30, which was 1.3 per cent lower than their estimate three months earlier.
They predicted investment of $152.5 billion in 2013-14, which is 8.1 per cent lower than the previous year but still came in at the top end of estimates, as economists had been fearing a stronger slowdown in investments.
Rate cut less likely
The dollar initially slipped below $US1.02 on the headline fourth-quarter number, but quickly regained ground and was recently trading 0.2 per cent higher for the day at $US1.0250.
ANZ currency strategist Andrew Salter said capital expenditure investment expectations for 2013-14 were "a little bit higher than what the market and what the RBA had factored into their forecasts".
"It's not a huge surprise but a positive surprise. We think that supports the Australian dollar going forward."
The market trimmed back its expectations of a rate cut at the RBA's board meeting next Tuesday to just 19 per cent. from around 25 per cent.
Commonwealth Bank senior economist Michael Workman said while the figures for the fourth quarter were soft, the 2013-14 expectations meant mining investment was still expected to peak later this year - and that a March rate cut was unlikely.
"If anything, [the Reserve Bank's board members] were preparing people for some weakening based on their own survey techniques," Mr Workman said.
"This was probably in line with those factors that they were considering when they were cutting rates last year, so it makes a move in March still as unlikely as yesterday.
"Now we just move on to the next set of employment figures as a possible break for the market in pricing away the chance of a [interest rate] move in the short term."
Mining investments to drop
The main contributor to the decrease in the 2013-14 expectation from the previous corresponding period was mining, with investment falling by 11.6 per cent, the Bureau of Statistics reported.
The 2013-14 expectation for building and structures was $111.8 billion, down 6.6 per cent from the same period the year before. Mining investment was expected to drop by 8.9 per cent.
A fall of 27.9 per cent in expected mining investment pulled the 2013-14 estimates in equipment, plant and machinery down to $40.7 billion.
Mining investment in 2012-13 is projected at $105.1 billion, compared with $108.1 billion three months earlier. In 2013-14, mining companies project spending $100.2 billion.
The estimate of capital expenditure for 2013-14 is expected to have a strong impact on the Reserve Bank's March board meeting next Tuesday.
Economists had been expectating investments of between $130 billion to $150 billion, which they said would mean the expected peaking of the mining boom would still be around mid-2013.
Estimates are gathered in a series of seven quarterly surveys, the first in January and February before the start of the financial year in July, and the seventh immediately after the financial year ends.
More to come